Though paring its gains early in the US session this morning, the United States Dollar is still setting a track for its fifth consecutive day of gains as the last month of this quarter kicks off in earnest.
Overview
US markets were closed yesterday but global FX markets were not, showing some volatility for USD in thin holiday trading. Risk-off attitude, in general, is dominating markets – most G10 currencies are retreating, and safe haven assets are outperforming.
After August’s rather ebullient equity performance, which saw the Dollar, by contrast, lose nearly 2% of its value, this very young month is set to open in the opposite direction. Equity futures are down this morning ahead of a short but quite data-heavy week that kicks off later this morning with S&P manufacturing PMI and a basket of ISM readings including prices paid and, once again, manufacturing. Though US markets as a whole have recovered from the spook they received early last month when the unemployment rate rose to a surprise 4.3% due to several subsequent smaller labor market readings that showed a healthier picture, some jitters do remain. Notably, however, September is historically a poor month for the stock market, which usually corresponds with a stronger performance from the Dollar.
Such historical expectations may not come true this month, though, as the Federal Reserve is all but guaranteed to pivot toward monetary easing and cut interest rates in just over two weeks. Traders currently believe there is a 25% chance that the Fed will cut interest rates by more than 25 basis points, but this is ahead of a crucial August payroll release due out this Friday. All told, September promises a return to volatile trading after a rather sleepy summer.
What to Watch Today…
- S&P Manufacturing PMI, Tuesday 9:45 AM
- ISM Manufacturing, Tuesday 10 AM
- Eurozone PMI, Wednesday
- UK PMI, Wednesday
- S&P Composite PMI, Thursday 9:45 AM
- Eurozone GDP, Friday
- Non-Farm Payrolls, Friday 8:30 am
- Monex USA Online is always open.
JPY ⇑
Japanese Yen is outperforming its G10 peers this morning and has gained more than three-quarters of a percent against the USD after hawkish comments from Bank of Japan Governor Kazuo Ueda overnight. Ueda once again emphasized that the central bank is ‘committed’ to raising borrowing costs, provided its forecasts of rising prices and strong economic growth continue to materialize. The Bank of Japan’s surprise outsized interest rate hike early last month was a major catalyst for the flash crash markets saw in the second week of August, and since then the central bank has spoken with an abundance of caution – any moves from the BoJ in the final four months of the year are likely to be telegraphed quite loudly in advance.
AUD ⇓
The Australian and New Zealand Dollars are underperforming this morning, sliding two-thirds and half a percent against USD, respectively. Iron ore prices swooned as rather dismal news out of China over the weekend showed that factory activity in the world’s second-largest economy fell to a six-month low and prices sank once again. Further trouble in the Hong Kong real estate sector, too, is in second-order keeping the Antipodean currencies depressed after shares of property developer New World Development fell an eye-watering 13% to a 12-year low in overnight trading.
